Monthly Archives: March 2014

Durham University published a well integrity study earlier this week which caused a fair amount of head scratching at Unconventional Gas 2014 in Aberdeen. Perhaps more than anything it proves that we desperately need to have some actual wells drilled in the UK to give scientists something to do.This from the Telegraph reflected the press release more than the study

A consistent motif among European shale fractivists and their City of Londongrad energy advisers/enablers has been that US shale production is too good to be true and will either disappear completely or be incredibly expensive after some declines that are just around the corner. Paul Stevens of Chatham House, Mike Liebreich of Bloomberg New Energy Finance, and John Dizard of the FT are all promoters of the theory that if US shale gas is a chimera, European and UK shale gas will, by extension be an even more expensive delusion. Let’s just call the whole thing off and keep on investing in renewables is one angle, although keep on buying Russian gas is an important subtext. The logic there is that Russia’s huge resources will always be the most reliable and cheaper in the long term. That theory has obviously gone bang big time, but how about the decline theory?

Faith in the shale fail theories is the final death rattle of the Peak Oil tendency. A key part of Peak Oil is to blind people not with science but with yesterday’s statistics. Models and scenarios are built on data from the past. Stevens, BNEF and Dizard miss one of the fundamental points of the shale revolution: the future won’t simply be a continuation of the past. The improvements in efficiency mean that, as even shale skeptic in chief Art Berman himself put it last year in a Houston presentation anything over 45 days in shale gas is ancient history.

It’s only March, but it now seems clear that for service to the industry, the winner of European Shale Gas Man of the Year will go to Vladimir Vladimirovich Putin.

It’s hard to know who is more surprised: Putin, the EU or Russian investors. It wasn’t meant to be like this. Putin forgot EU gas import dependency is matched by Russian export dependency.

Gazprom has the pipeline export monopoly and only opened up LNG exports to include Novatek in 2013. Within Russia there are many oil and gas producers, but Gazprom, as direct descendant of USSR Ministry of Gas Industry, and still 38% owned by the Russian Federation, has the monopoly of exports. This from Oxford Institute of Energy Studies from a couple of weeks ago is as up to date as one can get:

Sberbank estimates that Gazprom generated $162 billion of total revenues in 2013,34 meaning that gas exports to Europe as a whole accounted for 39% of this and exports through Ukraine for around 20%. Gazprom’s overall reliance on gas exports has been reduced over the past decade as the company has diversified into oil (via GazpromNeft), power generation and other related businesses. Nevertheless, the company would clearly be hit very hard by any interruption to its European exports.

A month or so back I reported on Laszlo Varro of the IEA saying the United States was complacent on public acceptance for shale. He’s starting to look right.

European shale companies, and their brave investors, often look at the US and dream of a social landscape that allows American companies to expand production quarter after unbelievable quarter. We certainly have any number of both US companies and City analysts declaring that the since the US shale revolution is a result of privately owned mineral rights, it will be hard to replicate here. What if they’re wrong? What if under the complex tectonics of US social geography, a big threat to US, and thus global, shale energy is lurking?

I love natural gas. It’s a great fuel, but the focus in Europe has been almost entirely on natural gas and not about the potential for oil production using the same techniques.

One reason may be what to call oil from shales. Is it shale oil? Is it tight oil? The answer is it doesn’t really matter. Oil is oil as natural gas is natural gas.

The combination of hydraulic fracturing, horizontal drilling and technology first gave rise to natural gas extraction in the US back in the 1990’s but a few people like Harold Hamm of Continental Resources and Mark Papa of EOG took Mitchell’s ideas to the next step.What if the same techniques could liberate oil?

The answer was found first in the North Dakota Bakken, then in the South Texas Eagle Ford and moved into the Permian Basin in West Texas. There are any number of developing oil plays n the US on the radar, but the basic lesson is that although oil production is not as widely distributed as natural gas, there is plenty of opportunity to go back to resources which only a matter of years ago were considered impossible to access.

The US domestic oil production has increased by over 2 million barrels a day since 2011. The nation is expected to achieve energy independence and to become the world’s largest producer. This from the Economist last month highlights how reality has emerged so fast that outdated perceptions still exist even in the US:

The benefits of shale oil are bigger than many Americans realise. Policy has yet to catch up

There have always been several myths about shale gas, pollution, earthquakes, flaming taps, etc, which have not stood up to examination, but there are also what I would call “Zombie Facts”. Zombie Facts are those that just plain wrong, but refuse to die. The facts themselves are complex and thus need some research to refute. They often come from reputable sounding sources and thus quickly jump the gap from plausibility to reality in the public eye.

There have always been several myths about shale gas, pollution, earthquakes, flaming taps, etc, which have not stood up to examination, but there are also what I would call “Zombie Facts”. Zombie Facts are those that just plain wrong, but refuse to die. The facts themselves are complex and thus need some research to refute. They often come from reputable sounding sources and thus quickly jump the gap from plausibility to reality in the public eye.

Back in the 1930’s Soviet agents set up a network of “useful idiots”, third party organisations that were supported, often unwittingly and almost always unknowingly, with a view of promoting foreign policy aims of the USSR.

Might there be a similar network of the naive who see themselves as genuinely protecting water, wildlife or countryside in any number of European countries, but who are supported by third parties serving the commingled interests of either Gazprom or Russia?

In the 1920’s and 1930’s the German Communist Willi Münzenberg set up a network of mutual aid organisations, many of whose members had no idea whose interests they were serving and would in fact be horrified if they knew.

That was then and today the PR machine is a far more sophisticated. Brenda Shaffer, writing in the respected US academic journal Foreign Affairs notes (behind paywall) on how Russia’s elemental interests in high energy prices is threatened by any number of alternate sources:

I’ve been speaking to a lot of environmental scientists lately, none of whom I want to out as speaking to the the fracking devils. The guys in the groves of academe are way ahead of the base stirred up enough that they live in a ditch for months on end.

We both disagree on more than we agree, although I think it’s fair to say that we both at least understand each other far more. I’d also say that they have moved their position more than I have mine and found themselves if not challenged, then at least pleasantly surprised. Understanding natural gas, like anything else is a crucial first step as Marie Curie put it:

Sometimes solutions are so obvious no one even mentions them. That’s the only rationale I can find for not mentioning the bleeding obvious: If Europe had more of their own energy supply, they wouldn’t be dependent on other people. One obvious solution is to use less energy, another to is to increase renewables. But that’s just deck chair rearranging of Titanic proportions. Given how the OECD has been incrementally using less energy per head year upon year for decades, and the multi billion effort aimed at renewables has given underwhelming results, it’s more like paying an interior decorator to fluff up the cushions. Despite years of failure, green calls to solve the energy trilemma of carbon, cost or security with efficiency and renewables alone result in only achieving expensive and inconsequential results.